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ACCIDENTS AFFECT BUSINESS just like they affect human nature: they create fragile and insecure actions. In an ideal situation, a business should create a win-win situation. In reality, in business anything can go wrong anytime for any reason. To do good and find good is not necessary in business. In no particular order, because they happen at random, here are some of the greatest accidental factors that influenced the business world:
Population: During the Roman Empire the globe's population was 200 million people; in 1650 it was 500 million; in 1850, 1.1 billion; in 1950, 2.4 billion; and in the year 2000, six billion. Today there is a greater number of people alive than all the people buried in ancient history. Each year 300 million babies are born, and 600 million new jobs must be created to keep the world's population employed. On the other end, an excess of manpower always produces extra unemployment.
Because the increased population needs to be fed and clothed, one might think that business would be better than ever. However, with the majority of people living in poverty, they generate little new business. The overproduction caused in trying to serve the new, unrealistic market generates only inflation and ruin.
Natural disaster gives businesses a tremendous boost, because they need to rebuild what nature destroyed. In case of the 1906 San Francisco earthquake, fire consumed the city. However at the same time, it created the banking system of America in response to a need for a safe institution to keep money.
The unsinkable Titanic, the biggest manmade moving object in the world, hit an iceberg that took the magnificent luxury ship and 1,500 rich passengers to the bottom of the ocean. Besides the human tragedy, it was a financial disaster for the shipping and insurance industry. The explosion of the "Hindenburg," the largest object ever to fly in 1937, marked the end of an era.
Epidemics like influenza, colds, and venereal diseases cost businesses hundreds of billions in losses each year. AIDS has devastated specific industries like fashion and the arts. At the same time, it gave an unexpected opportunity for straight people to succeed in those well-guarded businesses.
In the countries of Africa, almost half of the young, who provide the main labor force, are dying of AIDS, leaving a void in farming and the economy. Poverty and famine have followed, equally deadly for the African population.
Wars are accidents with mixed effects on business. The obvious bad accident is the massive destruction of lives and dwellings. However, the demands for sustaining a war make specific businesses boom with large production and profits. This continues with the reconstruction after the war. One of the paradoxes of war is that the soldiers who conquer far away lands and nations return home only to find out that their victories produced cheap foreign labor, putting many former winners out of business. The defeated soldiers face a much grimmer business situation.
Technological innovations may be divided into wood, coal, and petroleum burning, as means of powering machines. The use of electricity, steam, and automobile transportation began a distortion of business predictions, with ripple effects in the lives of billions of people.
Business has always depended on the achievements of science, and the Panama Canal is a prime example. The idea of digging the canal originated in 1600, but only by the end of the nineteenth century did the French begin its construction. After ten years of losses in human lives and all the investors' money, it proved to be a fiasco of unsurpassed proportions.
The Americans took over in their unique way: engaging a huge, mechanized power to move mountains and change the course of rivers. That was possible because, by then, the excavators, bulldozers, cranes, and other electrical machines and modern construction tools were capable of such pharaohic scale. On the other side of the coin, flying to the moon wasn't possible before 1960, because the necessary technology was not incorporated into any business.
An apparently unimportant discovery can have an incredible impact across all businesses. The invention of plastic wrap made it possible for billions of products to be sealed and kept on the shelves far longer. It prevented the natural aging of manufactured goods, which now could be sold like new, anytime. The attached bar-coded label makes possible a rapid and accurate sale, another important advancement in business. Today, high-tech industries manufacture products low in quantity and size but high in quality and profit.
Industrial or farming conglomerates can be devastating for the little producer. The United States of the 1930s had seven million farmers, but less than two million are in business today. In today's England, with a population of sixty million people, only 374,000 farm workers are left, most of them in debt and many in poverty. It is the effect of the food industry, which by looking for cheap imports ruined indigenous farms.
Immigration in the beginning of any industry is a blessing, because it provides cheap labor. Negro slave labor and other millions of newcomers including a steady supply of Mexican laborers built America into what it is today. Without the incredible spirit of discipline and sacrifice of Chinese laborers, the railroad business would have failed in its infancy.
New York City became the most dynamic business center in the world because its many ethnic populations competed against each other, providing a motivating force for the entire society.
Ethnic purchasing power often changes the traditional way of marketing and selling products. Uncounted millions of illegal immigrants provide a cheap labor enriching many businesses. The problem arises when an economic power attracts hungry immigrants willing to plunder it. Small but prosperous European countries already face business decisions regarding the right balance between foreign and native employees and their benefits.
Competition is healthy when it pushes businesses to make better products for cheaper prices. However, competition kills most of the profit. It can devastate a business that gets left behind, never catching up with the new market trend. Today, only a few businesses make horse-driven carriages, which one hundred years ago were part of a booming industry. The railroad replaced the horse transportation, but the automobile won the competition. Gasoline-powered transportation was cheaper, faster, and could pick up and deliver any product door to door.
In a similar way, the straight razor was replaced by disposable blades, and the cellular phone downsized traditional telephone companies. The United States Postal Service lost a lot of business to the UPS and other shipping companies more eager to serve customers. The postal service also lost business to e-mail, and fax services.
At the international level, the global competition became fierce, and at the end of the 1990s, the United States lost its world hegemony. Thus, among the top 25 global companies, 13 were non-American-owned, and of those, 5 were Japanese. Yet, China is the next business giant-in-waiting for its global share of the marketplace.
Conflicts of interest cover a huge territory. When cheaper foreign oil or steel find their way into the domestic market, they affect local industries. It is caused by politicians' attempts at providing their constituents with a savings. Usually, the affected businesses move away, merge, or simply close their doors, leaving local people unemployed. Such unpredictable effects triggered the largest decline in share values on Black Monday, October 19, 1987, resulting in a fall of 508 points on the Wall Street market.
Political interference is similar to the above accident, but it goes beyond that. It is the will of powerful politicians to generate or liquidate businesses. One must recall that in 1806, Napoleon saved industry in France by lending six million francs to her businessmen, who prevented an economic crash. The loan generated employment and saved the unity and strength of France.
One American political leader, De Witt Clinton (1769–1828) was probably the most responsible for the destiny of New York City and of America itself. The visionary governor decided to change the map of Manhattan, and after leveling the city, he redesigned it with a grid structure. Within a short time, he created a city with large avenues and streets, ready to accommodate traffic and business establishments with easy access to the ports. Then, in spite of opposition and money problems, he built the 363-mile-long Erie Canal, which connected New York City to Buffalo.
It was an enterprise paid for by business prospectors, who saw the profit-making potential in it—and they all became rich. Because Clinton knew how to use the united power of business and politics, New York became the Empire State, Manhattan became the financial capital of the world, and the United States became a global superpower.
In our time, nuclear plants and other mega-businesses are mostly the product of political decisions. A new highway spawns new businesses along its length, while it forces the closure of businesses now too far from the main traffic. Under the Reagan administration, the government's massive investment in industry gave a boost to American business. It produced "trickle-down economics" which positively affected the entire population.
Revolutions always inflict instability upon business. The liberal revolutions of 1848 pushed forward free enterprise, free trade, and technological progress. This ended small capitalism and opened the age of the collective industry and collective business.
A revolution in a country with rich natural resources can affect business in different countries. The political instability of one government or country can have a surprising and devastating domino affect in the domestic and international business worlds.
A prosperous business cannot survive in South America, Russia, former communist countries, or African countries, where organized crime has taken over the helpless governments. When citizens lose faith in their social system, including the police and judicial courts, no business can find stability, devoted workers, willing investors, or buyers.
Monopoly power is a large commodity or service controlled by one company or corporation. In reality it is the result of a takeover that eliminates competition, and a conspiracy of many united corporations to fix prices. A giant telephone or a cable TV company can take over a large area and increase their rates as they wish. Globalization means one thing: one corporation in control of money, which is the same corporation where all profits, or loses, return. It is the next step after monopoly, and it is the worldwide supremacy of a business.
Monopoly and globalization are generate a need for cheaper labor and materials from distant lands. The sad effect is that global operations kill the small businesses that do not want to be incorporated in the giant takeover. In many cases, like with NAFTA, precious jobs are taken from the U.S. and given to cheaper workers in Mexico.
Overproduction is an overextension of supplies in a specific or general market, which automatically decreases the demand for that product. Simply put, there are too many providers for the same need. Implicitly, that overabundant product will be discounted to be sold at any price, while factories keep manufacturing the same unwanted item. Items that cannot find buyers put their manufacturer out of business.
Timing regarding the opening of or continuation of a business is most important. To manufacture weapons and military equipment during a war is a perfect timing. But to mass produce rails after all of the railroads were built would have been a failure in understanding the market demand. Outdated entrepreneurial ideas can be very costly and damaging for any business.
Inflation usually results from an increase in the volume of money, which decreases its buying power. When it reaches the point that currency is not worth the paper it is printed on, the entire market collapses. Obviously, any business would have a hard time continuing in such an environment without suffering tangential harm.
Market fluctuations scare investors, who cash in devalued stocks. While bad for most people, hard times are beneficial for vulture-like investors, who find it the best time to buy valuable shares at a fraction of their real cost.
Credit access is vital: no business can survive without a banking system that includes lending. Without access to a line of credit, even through a loan shark, a business can go under in no time. Once credit is acquired, the business has no choice but to be successful in order to pay back the debt. Debt is not always bad: it disciplines people, and makes them work harder and stay out of trouble. Smaller businesses can grow to big businesses only if properly financed. When investors buy small business, they take bigger risks, because banks prefer to lend money to large, well-established businesses.
Bankruptcies mostly start with a vicious circle of debt when unpaid bills, and bounced checks put a stop to supplies and services. I shall not go into this sea of financial difficulties that everyone understands.
Recessions are the product of a vicious circle of non-spending customers who reduce economic activity and cut down productivity. Workers are laid off and jobs are cut, increasing unemployment and the number of non-consumers.
Economic depression is a vast collapse in the business world due to many accidents: economic stagnation, increased unemployment, panic-driven migration of population, political inefficiency, and other adverse social effects that can bring a nation to its knees. When banks close because they run out of money, it is called a Depression.
Ironically, the best solution to correct such a human drama is the tragedy of starting a war. The 1929 Depression healed only after American entered the WWII against Germany, Japan, and Italy, the global powers never-to-be. The immense destruction of war creates and increases all businesses, from making buttons to making aircraft carriers.
Pricing: An ancient Chinese business proverb states that the price had two sides: opportunity and danger—the opportunity to make money and the danger of losing money. Price usually decreases if large quantities are produced of the same item. The right or the wrong price can make or break any business. The accident occurs when the competition offers a similar product for a cheaper price and with a better warranty. Chinese businesses with their cheap labor run a gargantuan trade surplus with the U.S.A. because they sell cheap. Ultimately, it comes down the law of the survival of the fittest.
Distribution of products is extremely important, since the efficient ways to package, store and move goods expediently reduces the price. The example of fast food restaurants is a shining example of the procedure.
Efficiency: The rule of efficiency cannot be ignored in business. The workforce and technocrats produce needed goods. The other positions in a business, such as accounting, administration, and marketing, must be kept to a minimum size in order to cut the overhead and increase profitability. The smaller the business, the smaller the bureaucratic apparatus. The bigger the business, the larger it becomes, generated by a confused leadership eager to cover its mistakes with paperwork.
Reduction of bureaucracy eliminates negligence and re-focuses the business on its main lucrative factors. Avoidance of losses begins with calculating the chances for profit.
Language: An important role is played by the language used in business. Even in a meeting where the attendees speak the same language with the same meaning of words and terms, and where they sign an agreement, accidents of misunderstanding often happen. The reason is simple: selfishness in business generates accidents. In another words, each businessperson who attended the meeting understood mainly what was advantageous for him/herself and his or her company. Regardless of what was said and signed, he or she left with what was the most convenient understanding from his or her point of view. Herein lays the role of the lawyers, who draft the contracts and re-explain or renegotiate the terms of a contract in dispute.
New products are the result of a "Eureka" accident and often are a technological leap forward that forces businesses to adapt or perish. The gramophone was replaced by the electric turntable, which was replaced by the magneto phone, quickly replaced by the cassette player, then the CD player, and so on. Cheaper but more resistant materials replaced wool, cotton, wood, iron, and marble. Microchips changed modern industry and launched an industry unto itself to satisfy a huge demand for computers.
Marketing gimmicks are innovative ways to sell products by creating an image for it or a special occasion to buy it. The Ford Corporation was in a financial problem when its new "Mustang" hit the market appealing to young and cool drivers. Calendar events from Christmas to Valentine's Day are brilliant marketing ideas to attract customers into stores. Marketing a new produce must keep in mind that what people buy counts—not what they admire, but what they can afford. There is no substitute for a good, useful and long lasting product.
The food industry is a huge business that generates or increases other businesses, especially the farming, supermarkets, restaurants, transportation, refrigeration, etc. More than 30,000 McDonald restaurants around the world and many other fast food restaurants speak for the importance of food industry.
Luxury can be a huge, profitable business. One hundred years ago, Cecil J. Rhodes used the lure and mystique of diamonds to build the De Beers mining empire in South Africa. It caused vast happiness for rich women, untold suffering for the miners, and tribal wars that continue today in diamond-rich lands. Expensive furniture, china, and carpets are only a few luxury items that have made prosperous businesses.
Changes in fashion replaced men's high boots with shoes and vice versa for women. The miniskirts in the 1960s literally shortened the textile industry. When Cary Grant took his shirt off in a movie and revealed no tank top or T-shirt underneath, half of the men's underwear industry collapsed. Movie stars smoking onscreen boosted the tobacco industry like no advertising campaign could achieve. Top hats kept cars with a high roof. After the hats were out of fashion, aerodynamic cars with low roofs became the norm.
The arts seem to have an unlikely influence on the business world, and yet the Beatles' costumes revived the velvet industry in England and almost bankrupted many barbers left with no young men wanting haircuts. Art deco changed the style of many products, affecting the furniture industry. The beauty industry made it possible for Madam C.J. Walker to become a self-made millionaire by selling cosmetics and hair-care products. This happened before WWI—and she was black, making it even more surprising for that time.
Publicity, public relation, and advertising are the jugular vein of any business. Reviews, exposés, and other powerful media tools can make or break a business. When the press takes on a product and praises its quality and functionality, the business will likely increase its production and revenue. A poor media review can kill even a good product. Unfortunately, Enron was unrealistically overbuilt by the media, and thus, its collapse was that much more spectacular and irreversible.
New laws leave no room for negotiation regarding a product or a business. If a product was declared illegal to use, like asbestos, than the asbestos factories are out of business. However, this can also create new business opportunities, like multi-billion dollar asbestos abatement companies.
Strikes can be deadly for any business. An accidental death of a worker, an unsettled contract dispute, or a demand for a better pay can end in a walkout of employees, halting production. Carnegie, Ford, the mining industry, airlines, and others have encountered strikes of national importance. Many times the increasing demands of unions put solid and traditional companies out of business.
Tax evasion by a business does not go unnoticed by the government. If retroactive payments and accumulated interest are not delivered within a scheduled time, then the business will be closed and sold to the highest bidder.
Connections help a business to prosper. Political connections are the most important, because they can protect a business and provide it with more orders. The enviable Jewish businessmen are so successful because they use a reliable network that's been around since ancient times. Loyalty and trust, which are a problem in the Gentile world, is a preserved virtue in the co-operative Jewish business world. The honor system among diamond dealers, using a handshake as a bond for deals of millions of dollars without a written contract, is something no business school can teach.
Law suits can disrupt and even destroy a prosperous business. The crash of a passenger airplane can put an airline out of business, when the material loss is combined with lawsuits and labor disputes. Pan-Am, the American icon of air transportation, was one of the memorable victims of this type of accident.
Thieves and other criminals are attracted to rich businesses. Vandalism affects shopkeepers.
It is hard to envision a prosperous business in the South-Central Los Angeles area, ravished as it is by gang fights and ethnic riots. Theft can put a company out of business, regardless of whether it is done by employees, management, or customers. White-collar criminals, who bleed their companies out of money in illegal ways, are by far the worst destroyers of large businesses and global monopolies.
Con artists and their predatory practices can ruin businesses and leave millions of people penniless. Investment wizards like Jay Gould, Ivan Boetsky, and Mike Milken have achieved incredible personal wealth and social status. They turned out to be unscrupulous predators who abused the public's trust. They were real accidents of deceit in the financial and business world. Even though the long arm of justice moved them from the pride of their companies to prison, honest investors lost billions of dollars because of them.
Global business creates mammoth companies that take over international businesses. The idea was initiated by Max Weber, who believed that in the modern world, an individual's desire for economic stability will cause them to choose bureaucracy over democracy. Smart businessmen listened to his advice, and the corporate world was born, providing prosperity for the individuals and nations that controlled it.
Globalization in business is the pinnacle of advanced capitalism, which ends with the privatization of national assets in many countries. It creates millions of employees whose loyalty belongs to their corporation, not to their governments. It is based on the idea that bigger is better, and the modern way of doing business is the only way. Many times it does not sit well with the old world, which sees globalization as a shrewd way to conquer nations without war. The global village effect is perceived more like the global pillage by the huge corporations.
In our time, the proletarian misery of the African or South American nations is blamed on big foreign businesses in need of cheap labor. Still, this need provides an income for these nations, which is better than no employment at all. However, inherited envy and greed triggers the unrest of the masses against big capital and generates political and economical instability in Third World countries. Its effects extend beyond regional boundaries. Terrorist attacks carried out by religious and anti-imperialistic fanatics are the most noticeable outcome.
Terrorism lowers the morale and confidence of business-leading nations and greatly affects vulnerable societies at all levels. After September 11, 2001, the American stock market collapsed so sharply that weekly and monthly magazines skipped a month's worth of printing. The reason was that businesses were doing so badly, they saw no need to buy space for advertising.
The airline and tourism industries were the first businesses to be seriously affected. Other effects were equally grim. The attacks' one-year anniversary caused the stock market to plummet further and caused a decline in the American economy, which lost 300,000 businesses in New York State alone, and 1.7 million jobs across the nation. One year later, one million workers joined the unemployment lines. The American public lost trust in internationally owned companies.
Another effect of the attacks was the reduction of welfare and other social programs. Due to the same lack of funds, more prisoners were paroled from jails. That social situation increased the crime rate by two percent, and in 2001 the value of stolen goods, mainly from businesses, amounted to $532 billion. The grim picture of American prosperity had a backlash on the immigration quota, which dropped from 68,000 admitted refugees per year to 27,000.
Not all accidents in business are bad, because they teach good lessons. The most important lesson is that some accidents are reversible. A failure in one direction means that you were going in the wrong direction. One must rethink the situation, regroup forces, retarget the goal, and act with a better plan. Surviving in business is accepting reality and putting the unexpected changes to good use.